[Federal Register Volume 60, Number 187 (Wednesday, September 27, 1995)]
[Rules and Regulations]
[Pages 49739-49748]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-23950]



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  Federal Register / Vol. 60, No. 187 / Wednesday, September 27, 1995 / 
Rules and Regulations  

[[Page 49739]]


DEPARTMENT OF AGRICULTURE

Food and Consumer Service

7 CFR Part 248

RIN 0584-AB43


WIC Farmers' Market Nutrition Program

AGENCY: Food and Consumer Service, USDA.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This final rule amends and finalizes an interim rule that was 
published on March 11, 1994 establishing requirements for the operation 
and management of the WIC Farmers' Market Nutrition Program (FMNP). The 
purposes of the FMNP are to provide resources to women, infants, and 
children who are nutritionally at risk, in the form of fresh, 
nutritious, unprepared foods (such as fruits and vegetables) from 
farmers' markets; to expand the awareness and use of farmers' markets; 
and to increase sales at such markets.
    This rule also implements the nondiscretionary FMNP mandates of the 
Healthy Meals for Healthy Americans Act of 1994, signed November 2, 
1994.

EFFECTIVE DATE: This final rule is effective on October 1, 1995.

FOR FURTHER INFORMATION CONTACT: Barbara Hallman or Debra Whitford, 
Supplemental Food Programs Division, Food and Consumer Service, USDA, 
3101 Park Center Drive, Room 540, Alexandria, Virginia 22302, (703) 
305-2730.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be not significant for purposes of 
Executive Order 12866 and therefore has not been reviewed by the Office 
of Management and Budget.

Executive Order 12372

    This program is subject to Executive Order 12372, which requires 
intergovernmental consultation with State and local officials (7 CFR 
part 3015, subpart V, and final rule-related notice published June 24, 
1983 (48 FR 29114)).

Executive Order 12778

    This rule has been reviewed under Executive Order 12778, Civil 
Justice Reform. This rule is intended to have preemptive effect with 
respect to any State or local laws, regulations or policies which 
conflict with its provisions or which would otherwise impede its full 
implementation. This rule is not intended to have retroactive effect 
unless so specified in the ``Effective Date'' paragraph of this 
preamble. Prior to any judicial challenge to the provisions of this 
rule or the application of its provisions, all applicable 
administrative procedures must be exhausted.

Regulatory Flexibility Act

    The Department has also reviewed this rule in relation to the 
requirements of the Regulatory Flexibility Act of 1980 (Pub. L. 96-354, 
94 Stat. 1164, September 19, 1980). The Administrator of the Food and 
Consumer Service has certified that this final rule does not have a 
significant economic impact on a substantial number of small entities. 
Participating farmers and farmers' markets will be affected by the FMNP 
requirements and increased sales generated by FMNP recipients. In 
addition, participating State and local agencies will be affected by 
FMNP administration requirements. Participating State and local 
agencies receive Federal food and administrative funds to meet the 
requirements established in this rule. In addition, State agencies must 
contribute at least 30 percent of the cost of the program, except 
Indian Tribal Organizations which may receive a negotiated match 
contribution that is less than 30 percent but not less than 10 percent. 
Finally, there are no costs to farmers or farmers' markets for applying 
for the FMNP.

Paperwork Reduction Act

    The reporting requirements established by this rulemaking have been 
reviewed and approved under Office of Management and Budget control 
number 0584-0477, in accordance with the Paperwork Reduction Act of 
1980 (44 U.S.C. 3507).

           Estimated Annual Reporting and Recordkeeping Burden          
------------------------------------------------------------------------
                         Annual                   Average       Annual  
     Section of        number of      Annual     burden per     burden  
     regulations      respondents   frequency     response      hours   
------------------------------------------------------------------------
                                Reporting                               
                                                                        
------------------------------------------------------------------------
248.4...............           26            1           50        1,300
248.10(b)...........          550            1            2        1,100
248.17(b)(2)(ii)....            4            1           10           40
248.18(b)...........           26            1           15          390
248.23(b)...........           26            2          4.5          234
                     ---------------------------------------------------
      Total.........          576  ...........  ...........        3,064
                                                                        
------------------------------------------------------------------------
                             Recordkeeping                              
                                                                        
------------------------------------------------------------------------
248.9...............           26            1            1          26 

[[Page 49740]]
                                                                        
248.10(a) (2) (3)...        1,100            1            2        2,200
248.10(e)...........          110            1            2          220
248.10(f)...........           26            1            5          130
248.11..............           26            1           12          312
                     ---------------------------------------------------
      Total.........        1,126            1  ...........        2,888
                     ===================================================
      Total                                                             
       Reporting and                                                    
       Recordkeeping                                                    
       Burden.......  ...........  ...........  ...........        5,952
------------------------------------------------------------------------



Good Cause Determinations

    This final rule incorporates several new statutory requirements 
from the Healthy Meals for Healthy Americans Act of 1994 (Pub. L. 103-
448) enacted on November 2, 1994 which became effective October 1, 
1994. These provisions were not contained in the prior interim rule of 
March 11, 1994 and pertain primarily to funding issues. The provisions 
include the following: A 17 percent administrative cost reimbursement 
rate for all State agencies, authority to negotiate the matching 
requirement for Indian Tribal Organizations, expansion of the 
definition of State agency, change in the division of funds remaining 
after base grants have been allocated to 75 percent for current States 
for expansion and 25 percent to initiate new States, availability of up 
to 2 percent of total grant for market development, and elimination of 
carry forward authority. These resulting regulatory changes are non-
discretionary, and accordingly, good cause exists for waiving prior 
notice and comment.

Background

    Section 501 of the Hunger Prevention Act of 1988 (Pub. L. 100-435), 
enacted on September 19, 1988, amended the Child Nutrition Act of 1966 
(CNA), 42 U.S.C. 1771 et seq., to add a new subsection 17(m) which 
authorized up to 10 Farmers' Market Coupon Demonstration Projects 
(demonstration projects) for a 3-year period.
    Although authorization for the demonstration projects expired at 
the end of Fiscal Year 1991, as part of the Rural Development, 
Agriculture, and Related Agency Appropriations Act for Fiscal Year 1992 
(Pub. L. 102-142), Congress appropriated up to $3 million to carry on 
the projects. As a result, the demonstration projects operated another 
year, through Fiscal Year 1992.
    Based largely on the success of the demonstration projects, on July 
2, 1992, the President signed the WIC Farmers' Market Nutrition Act of 
1992 (Pub. L. 102-314). This Act amended section 17(m) of the CNA (42 
U.S.C. 1786(m)) to authorize the FMNP as a permanent program. 
Therefore, on March 11, 1994, the Department published an interim rule 
(59 FR 11508) addressing the mandates of Pub. L. 102-314. Also included 
in the interim rule were references to requirements in Department-wide 
rules which apply to Uniform Administrative Requirements for Grants and 
Cooperative Agreements to State and Local Governments (7 CFR part 
3016), Governmentwide Debarment and Suspension (Non-Procurement) 
Requirements (7 CFR part 3017), Governmentwide Requirements for Drug-
Free Workplace (7 CFR part 3017), Governmentwide Restrictions on 
Lobbying (7 CFR part 3018), Departmental regulations on 
nondiscrimination (7 CFR part 15, 15a, and 15b), Title VI of the Civil 
Rights Act of 1964, Title IX of the Education Amendments of 1972, 
section 504 of the Rehabilitation Act of 1973, the Age Discrimination 
Act of 1975, and independent audit requirements in accordance with 7 
CFR part 3015, 3016.26 or part 3051.

Summary of Comments Received on the Interim Rule

    The March 11, 1994 interim rule provided for a 120-day comment 
period, which ended on July 11, 1994. Fifteen comment letters were 
received from a variety of sources, including FMNP State agencies, WIC 
State agencies, a public interest group, a governor's office, a 
Congressional office, and an orchard.
    The Department has given all comments careful consideration in the 
development of this final rule and would like to thank all commenters 
who responded. Following is a discussion of each provision that 
received comments, and an explanation of the changes made in this final 
rule. Provisions on which no comments were received or no changes were 
made as a result of Public Law 103-448, are not addressed in the 
preamble and remain as published in the interim rule.

Conceptual Framework for FMNP Policy Making (Outlined in Preamble 
Section of the Interim Rule Under WIC Farmers' Market Nutrition 
Program, States With Demonstration Projects)

    The interim rule stated in the preamble section that because the 
FMNP will operate as an adjunct to WIC, the preamble would only discuss 
in detail individual provisions that are unique to the FMNP. Three 
commenters remarked that it was inappropriate for FCS to make the 
statement outlined above. These commenters suggested that the final 
rule reflect the distinctive differences between WIC and FMNP. This 
statement in the interim rule was merely intended to highlight the fact 
that since FMNP eligibility is limited to WIC participants or persons 
on the WIC waiting list, the programs are intended to operate in a 
complementary fashion. The focus of the interim rule and this final 
rule, however, are the distinct rules for operation of the FMNP. WIC 
Program regulations are not affected by this rule.

1. Definitions (Sec. 248.2)

    In the interim rule, ``Eligible foods'' were defined as fresh, 
nutritious, unprepared, domestically grown fruits, vegetables and herbs 
for human consumption. Eligible foods may not be processed or prepared 
beyond their natural state except for usual harvesting and cleaning 
processes. Honey, maple syrup, cider, nuts, seeds, eggs, meat, cheese 
and seafood are examples of foods not eligible under the FMNP.
    Several commenters addressing this provision opposed or supported 
with modifications, the definition. Three commenters wanted apple cider 
included in the list of eligible foods because, as they indicated, 
``cider is not processed''. Two commenters wanted herbs excluded from 
the definition because they believed herbs were not nutritious and were 
not specified in the law. Other commenters approved the 

[[Page 49741]]
definition as long as ``locally grown'' replaced ``domestically 
grown''. These commenters expressed the view that this would preserve 
the unique identity and significance of the FMNP. They further stated 
that the Department should require that produce be locally grown. 
According to these same commenters, State agencies could then further 
clarify how they define locally grown.
    In view of the concerns raised by commenters that ``locally grown'' 
be included in the definition of eligible foods and the Department's 
interpretation of the intent of Congress, we have replaced 
``domestically grown'' with ``locally grown'' in the definition of 
eligible foods in the final rule, provided that in no instance can the 
State agency define ``locally grown'' to include foods grown outside of 
the United States and its territories. States shall generally consider 
locally grown to mean produce grown only within State borders but may 
define it to include areas in neighboring States adjacent to its 
borders.
    After thorough consideration, we have determined that apple cider 
should remain excluded from the list of eligible food items. This 
conclusion was based on the Department's view that any food that has 
been altered from its naturally occurring state, except for usual 
harvesting and cleaning processes, is considered to be ``processed'' 
for purposes of the FMNP. The primary purpose of preventing FMNP coupon 
sales of processed foods is to prevent the value of the coupons from 
being expended on processing costs. Regarding the comments concerning 
``herbs'', the Department has retained them in the definition of 
eligible foods. The Department would like to point out, however, that 
State agencies have the ability to develop their own list of eligible 
foods within the regulatory definition, so a State agency may choose to 
exclude herbs if they wish to do so.
    ``Farmer'' was defined as an individual authorized to sell produce 
at participating farmers' markets. Individuals who exclusively sell 
produce grown by someone else, such as wholesale distributors, cannot 
be authorized to participate in the FMNP. State agencies have the 
option to authorize individual farmers or farmers' markets.
    About half of the commenters responding to this definition opposed 
the definition. Of those opposed, some stated that the Department 
should set a standard that a participating farmer must grow at least 
half of the produce that he/she sells at the market. Another commenter 
suggested that the Food and Consumer Service (FCS) consult with the 
Agricultural Marketing Service and convene a taskforce of State FMNP 
directors to develop a definition of ``farmer''.
    Of the commenters who supported this definition, they did so as 
long as ``who locally grows fresh fruits and/or vegetables'' is 
included in the definition.
    The Department believes that the definition of ``farmer'' 
established in the interim rule provides each State agency with the 
broadest flexibility in authorizing farmers to meet the specific needs 
of its program. The definition allows State agencies, if they so 
desire, to set a standard for the amount of produce a participating 
farmer must grow. Therefore, the Department is retaining the definition 
of ``farmer'' as it was set forth in the interim rule. Because the 
Department has included ``locally grown'' in the definition of eligible 
foods, it has not been repeated in the definition of ``farmer''.
    ``Farmers' market'' was defined as an association of local farmers 
who assemble for the purpose of selling their produce directly to 
consumers. In cases where recipient access to farmers' markets is an 
issue, and with prior FCS approval, the definition of farmers' market 
may be expanded to include farmstands at which authorized farmers sell 
their produce.
    The majority of commenters supported the definition as long as some 
of the issues regarding ``farmstands'' are modified. Some of these 
commenters suggested that FCS should not have to grant prior approval 
for every farmstand. Other commenters disagreed with the Department's 
discussion in the preamble which stated that farmstands are not as 
stable as markets. One other commenter suggested inserting ``at a 
defined location'' into the definition.
    Two commenters opposed the definition. One of these commenters 
stated that farmstands should not be generally precluded from the FMNP. 
The commenter indicated that this is an example of the WIC Program 
focusing solely on the interests of the WIC population while ignoring 
the interests of the farmers' markets.
    Based on the comments received, the Department has revised the 
definition of farmers' market by inserting ``at a defined location'' 
after the words ``who assemble for the purpose of selling their produce 
directly to consumers''. We have also clarified that prior FCS approval 
for farmstands may be obtained through the State Plan process.
    ``In-kind contributions'' has been added in Sec. 248.2 to 
accommodate its inclusion as an alternative for meeting the match 
requirement. For purposes of the FMNP, in-kind contributions means 
property or services which benefit the FMNP and which are contributed 
by non-Federal sources without charge to the FMNP.
    ``Matching requirement'' was defined in the interim rule as non-
Federal cash outlays in an amount equal to not less than 30 percent of 
the total FMNP costs for the fiscal year. This match may be satisfied 
through non-Federal cash expenditures for the FMNP or for similar 
farmers' market programs which operate during the same period as the 
FMNP.
    One commenter approved of the provision as stated and another 
commenter opposed it stating that the match should be reduced from 30 
percent to 25 percent of the total cost of the Program.
    As later explained in the definition of ``similar programs'', some 
commenters suggested that low-income be included when referencing other 
groups served by similar programs that are used to meet the matching 
requirement. Based on these comments, we have made this revision in the 
definition of ``matching requirement'' in the final rule.
    The match requirement is set by statute. Section 204(v)(1) of 
Public Law 103-448 (November 2, 1994) amended section 17(m)(3) of the 
CNA (42 U.S.C. 1786(m)(3)) to allow the Secretary to negotiate a lower 
percentage of matching funds for Indian Tribal Organizations, but not 
lower than 10 percent of the total cost of the program. The negotiated 
match is authorized if the Indian State agency demonstrates to the 
Secretary financial hardship for the affected Indian tribe, band, 
group, or council. The final rule has been revised to reflect this new 
authority. The lower negotiated rate is only available to Indian Tribal 
Organizations.
    The Department has further revised the definition in the final rule 
by removing the word ``cash'' from the definition. This adjustment was 
made in order to accommodate in-kind contributions which may be used to 
meet the match requirement. Finally, the wording in the first sentence 
of the definition has been slightly modified for clarity.
    ``Recipient'' was defined as a person chosen by the State agency to 
receive FMNP benefits. Such a person must be a woman, infant over four 
months of age, or child, who receives benefits under the WIC Program or 
is on the waiting list to receive benefits under the WIC Program. 
Infants under four months of age are excluded from eligibility in the 
FMNP based on the recommendation of the American 

[[Page 49742]]
Academy of Pediatrics (AAP) that such infants not consume solids due to 
the level of development of their gastrointestinal tract.
    One commenter suggested omitting the clause which excludes infants 
four months of age or younger since this is understood and since it 
conflicts with the legislation that allows for the serving of 
households.
    The Department believes the definition serves as a cautionary 
reminder of the AAP recommendation to participants and, accordingly, 
has decided to retain the definition as it was stated in the interim 
rule.
    ``Similar Programs'' was defined as other farmers' market projects 
or programs which serve women, infants and children, or other 
categories of recipients, such as, but not limited to, elderly persons.
    The majority of commenters supported this definition as long as it 
was modified to state that these similar programs must serve low-income 
people. One commenter suggested that a maximum income guideline should 
be established for non-WIC households, equal to that which is used in 
WIC, for those States utilizing the similar programs provision to meet 
the matching requirement.
    In view of the comments received, the Department has inserted the 
words ``low-income'' before ``women, infants and children'' to clarify 
the types of similar programs that can be used to meet the matching 
requirement. A corresponding adjustment has also been made to the 
definition of ``matching requirement.''
    ``State'' has been added in Sec. 248.2 since it is referred to in 
the text of the regulation. ``State'' means any of the 50 States, the 
District of Columbia, the Commonwealth of Puerto Rico, the Virgin 
Islands, Guam, American Samoa, and the Northern Marianas Islands.
    ``State agency.'' The interim rule defined ``State agency'' to be 
the agriculture, health or comparable department of each State. Section 
204(v)(11) of Pub. L. 103-448 amended Section 17(m)(11)(D) of the CNA 
(42 U.S.C. 1786(m)(11)(D)), to expand the definition of State agency to 
include any other agency approved by the chief executive officer of the 
State. The Department wishes to clarify that, for purposes of this 
rule, when reference is made to, ``State agencies that have not 
participated in the FMNP'' or to ``State agencies that are 
participating for the first time'', this does not refer to a FMNP that 
has previously been administered by a different entity within the 
State. This final rule incorporates these revisions.

2. State Plan Requirements (Sec. 248.4(a))

    a. Farmstand Locations. The interim regulations required that 
States wishing to authorize farmstands may do so only when recipient 
access to farmers' markets is an issue and with prior approval from 
FCS. Because the State Plan process is the vehicle States have for 
submitting their program plans for approval, we have clarified in 
Sec. 248.4(a)(10)(ii) of this rule that State agencies desiring to 
authorize farmstands justify doing so through the State Plan process. 
For further clarification, the State Plan submission requirements in 
Sec. 248.4(a)(8)(i) have been revised to include the number and 
location of farmstands and their proximity to clinics. The Department 
believes this will permit evaluation of whether recipient access to 
farmers' markets is at issue.
    b. Requests for Market Development/Technical Assistance Funds. As 
set forth in section 204(v)(2)(B) of Pub. L. 103-448 and clarified in 
Sec. 248.14(h) of this rulemaking, States may use up to 2 percent of 
total program funds for market development or technical assistance if 
the Secretary determines that the State intends to promote the 
development of farmers' markets in socially or economically 
disadvantaged areas, or remote rural areas, where individuals eligible 
for participation in the program have limited access to locally grown 
fruits and vegetables. The Department believes that the State Plan 
process is the most efficient method for handling requests to direct 
program funding to market development or technical assistance. 
Accordingly, a new Sec. 248.4(a)(20) is added to require State agencies 
desiring to fund such activities to request and to justify the need for 
such activities in the State Plan.

3. Data Collection (Secs. 248.4 (a)(16) and (17))

    The interim regulations required that State agencies submit, as an 
addendum to the State Plan, information on the change in consumption of 
fresh fruits and vegetables by recipients; and information on the 
effects of the FMNP on the use of farmers' markets, the marketing of 
agricultural products, and recipients' awareness regarding farmers' 
markets.
    One commenter stated that the data collection requirement which 
assesses the effects of the FMNP on recipients and farmers is 
appropriate if it is cost effective and generates reliable information.
    Section 204(v)(7) of Pub. L. 103-448 amended the information 
collection requirements as they pertain to the collection of 
information on the change in consumption of fresh fruits and vegetables 
by recipients and the effects of the program on farmers' markets. The 
CNA now requires that such information shall only be collected if it is 
available. Sections 248.4(a) (15) and (16) of this final rule have been 
modified accordingly. In any data collection effort for the FMNP, the 
Department encourages the use of the most cost-efficient method that 
yields reliable information.

4. Recipient or Household Allocation of Benefits (Sec. 248.6(c))

    This provision of the interim rule allows State agencies to 
allocate the quantity of benefits on an individual basis or a household 
basis. In situations where benefits are issued on a household basis, 
the household could receive fewer benefits as a unit than it otherwise 
would if benefits were allocated to individual household members. Under 
either allocation methodology, foods provided are intended for the sole 
benefit of FMNP recipients and are not intended to be shared with other 
non-participating household members.
    One commenter approved of the provision as long as the statement 
that foods be approved for the sole use of WIC participants in the FMNP 
household be omitted. Other commenters indicated that since the CNA 
permits benefits to be issued on a household basis, it clearly suggests 
that the exclusion of any household member is not the intent of the 
FMNP.
    One other commenter objected to the inclusion of a household 
benefit allocation option because, as was indicated, ``it is not an 
equitable way to allocate benefits to participants''.
    The Department has decided to retain the definition as it was 
stated in the interim rule. As explained in the preamble to the interim 
rule, the Department believes State agencies should retain the option 
of reaching a greater number of households by allocating benefits on a 
household basis. The statement that the foods should be solely for use 
by FMNP participants is consistent with the FMNP's eligibility 
requirements.

5. Coupon and Market Management--Authorization/Training Visits 
(Sec. 248.10(a)(4))

    The interim rule required that a State agency conduct a documented 
on-site training visit prior to, or at the time of, authorization of a 
farmer or farmers' market. The on-site visit shall include, at a 
minimum, provision of information 

[[Page 49743]]
concerning eligible foods and proper FMNP coupon redemption procedures.
    All commenters responding to this provision opposed the timeframe 
of the provision. These commenters stated that markets are not open 
prior to, or at the time of authorization, so it would be impossible to 
conduct on-site visits.
    The primary reason for requiring the documented on-site training 
visit prior to, or at the time of, authorization was to ensure that 
farmers/farmers' markets were advised of critical program information 
concerning, at a minimum, eligible foods and proper FMNP coupon 
redemption procedures before they began accepting FMNP coupons. The 
Department is sensitive to the concerns raised by the commenters 
regarding the practical application of this provision. Therefore, based 
on the comments, the Department has revised the provision to read, 
``the State agency shall conduct face-to-face training for all newly 
authorized farmers and farmers' markets prior to their commencing 
participation in the FMNP.'' ``Newly authorized'' refers to those 
farmers/farmers' markets in their first year of participation in the 
FMNP. In addition, during their first year of participation, new 
farmers/farmers' markets must be considered ``high-risk'' and must be 
placed in the pool from which other high-risk farmers/farmers' markets 
are placed for selection of farmers/farmers' markets to monitor. 
Monitoring requirements are outlined in Sec. 248.10(e).
    The face-to-face training must include the minimum training 
requirements outlined in Sec. 248.10(d). Face-to-face training prior to 
participation in the program provides safeguards to ensure that new 
farmers/farmers' markets are properly informed of program requirements 
prior to initiation of the program.

6. Farmers' Markets Agreements (Sec. 248.10(a))

    The introductory paragraph of Sec. 248.10(a) of the interim rule 
stated that the State agency is responsible for the fiscal management 
of, and accountability for, farmers/farmers' markets. Two of the 
commenters responding to this provision believed it created the 
impression that the State agency's FMNP oversight responsibilities are 
not just limited to FMNP-related activities. Accordingly, the 
introductory language in Sec. 248.10(a) is amended by this final rule 
to clarify that in operating the FMNP, the State agency is only 
responsible for FMNP-related activities of the farmer/farmers' market, 
not their actions or activities in general.
    The Department also wishes to clarify the face-to-face training 
requirements in Sec. 248.10(d). In those State agencies that enter into 
authorization agreements with farmers' markets, the market managers may 
receive the face-to-face training and then, in turn, may provide such 
training to their participating farmers. This would fulfill the face-
to-face training requirements of Sec. 248.10(d). Alternatively, State 
agencies may meet this requirement by assuming responsibility for face-
to-face training both for market managers and for participating 
farmers.

7. Monitoring and Review of Farmers/Farmers' Markets and Local Agencies 
and Sanctions--(Secs. 248.10(e) (2) and (4))

    The interim regulations required that State agencies rank 
participating farmers and farmers' markets by risk factors, and that 
they conduct annual, on-site monitoring of at least 10 percent of 
farmers and 10 percent of farmers' markets beginning with those farmers 
and markets identified as being the highest risk. Mandatory high-risk 
indicators are a proportionately high volume of FMNP coupons redeemed 
by a farmer as compared to other farmers within the farmers' market and 
within the State, and recipient complaints. The interim rule also 
required that at least every 2 years, State agencies conduct a review 
of all local agencies within their jurisdiction.
    Several commenters opposed these provisions. One commenter said 
that the transitory nature of farmers makes monitoring and sanctioning 
requirements not enforceable. Another commenter suggested eliminating 
the comparison of farmers for determination of which are high-risk, 
since as this commenter indicated, farmers' markets may be very small 
with only a low volume of coupons redeemed, and therefore, not inclined 
to abuse the Program.
    Two commenters approved of the provisions as long as some 
adjustments to the provisions are made. One of these commenters 
suggested that it is impractical for administrative efficiency reasons, 
to conduct on-site monitoring of markets and farmers in strict rank 
order of risk.
    Another commenter said that it is impractical to conduct WIC local 
agency reviews at the same time as the FMNP reviews, given the short 
amount of time (summer months) that the FMNP is being administered. The 
commenter suggested clarifying this section to accommodate the seasonal 
nature of the FMNP. One commenter stated that the 10 percent standard 
used for farmers and farmers' markets should also be applied to local 
agencies, which the interim regulations also require to be reviewed 
every two years. This commenter went on to say that the requirement to 
review all local agencies every two years is unrealistic given staffing 
and budget constraints, plus the limited time FMNP coupons are actually 
being distributed at the local agency.
    Based on some of the comments received, the Department has revised 
the provisions. First, we wish to clarify that even in farmers' markets 
where farmers are very small with a low volume of coupons redeemed, 
significant differences in redemption rates may indicate program abuse. 
Accordingly, the Department believes comparing redemption rates among 
farmers in each market and within the State represents a valid high-
risk indicator. Although the final rule still requires State agencies 
to consider comparison of redemption rates among farmers in each 
market, the Department points out that State agencies are free to 
accord this factor whatever weight they deem appropriate in 
establishing the high-risk rankings.
    The Department is further modifying the final rule to clarify that 
high-risk farmers and farmers' markets are not required to be visited 
in strict rank order of their risk. Rather, once State agencies have 
identified the highest risk farmers and farmers' markets to be 
monitored, the State agency can determine the schedule or order in 
which they will be visited based on location, staff resources and other 
factors. Accordingly, the phrase ``beginning with'' has been deleted 
from Sec. 248.10(e)(2).
    With regard to the monitoring requirements for farmers and farmers' 
markets contained at Sec. 248.17(e)(1)(i), a State agency commenter 
suggested that the 10 percent minimum requirement targeted at farmers 
and markets determined to be ``high-risk'' was inadequate, and that it 
should be modified to include a monitoring visit for farmers and 
farmers' markets that have never previously participated in the FMNP. 
The Department has considered this comment and has determined that a 
monitoring visit to all farmers that have never previously participated 
in the FMNP may be excessive for some States during one FMNP season. 
The Department has however taken the comment into consideration and has 
modified Sec. 248.10(e)(2) to require State agencies to include lack of 
previous participation in the FMNP, as a high-risk indicator along with 
the other high-risk indicators in Sec. 248.10(e)(2). Accordingly, 
farmers in their first year of participation may 

[[Page 49744]]
now be subject to monitoring visits. The final rule identifies three 
mandatory high-risk indicators: 1. a proportionately high volume of 
FMNP coupons redeemed by a farmer as compared to other farmers within 
the farmers' market and within the State; 2. recipient complaints; and 
3. farmers and farmers' markets in their first year of FMNP operation.
    The Department would like to clarify that the intent behind 
defining a farmer/farmers' market as high-risk in the FMNP is for 
purposes of identifying those farmers/farmers' markets that may be 
subject to a monitoring visit. It is in no way intended to stigmatize 
them with a label. Farmers participating in the FMNP for the first time 
are considered high-risk (and thus subject to monitoring) because they 
have not previously participated and so may not be as familiar with 
program operations.
    If after application of the high-risk indicators, a State agency 
identifies fewer than 10 percent of its farmers and farmers' markets as 
high-risk, the State agency shall randomly select additional farmers 
and farmers' markets to monitor in order to meet the 10 percent 
minimum.
    The high-risk indicators listed above generally apply to a State 
agency already participating in the FMNP. A State agency participating 
in the FMNP for the first time shall, in lieu of applying the high-risk 
criteria, randomly select 10 percent of its participating farmers and 
10 percent of its participating farmers' markets for monitoring visits.
    The Department also wishes to clarify that 10 percent of farmers 
and 10 percent of farmers' markets must be monitored, not 10 percent of 
farmers within a market selected for review. For example, if there are 
five farmers' markets in a participating State and 40 farmers, the 
State shall monitor at a minimum, one farmers' market and four farmers. 
These four farmers may or may not be participating within the one 
farmers' market being monitored.
    With regard to local agency reviews, the Department encourages 
State agencies to conduct reviews of FMNP practices at WIC local 
agencies during the FMNP season. We have clarified that, when this is 
not practical, reviews of FMNP practices at the WIC local agency may be 
conducted any time during the year. Reviews conducted outside of the 
FMNP season would include a review of documents and procedural plans or 
practices of those items listed in Sec. 248.17(c)(1)(ii). The final 
regulatory language at Sec. 248.17(c)(1)(ii) has also been clarified to 
read as follows: ``WIC State agency reviews of WIC local agencies 
conducted for the WIC Program may contribute to meeting the FMNP 
requirement that all local agencies be reviewed once every two years if 
the reviews include reviews of FMNP practices.''

8. FMNP Costs--Composition of Allowable Costs and Specified Allowable 
Administrative Costs (Sec. 248.12(a))

    In Sec. 248.12(a)(1)(ii) of the interim rule, the reference to ``7 
CFR part 3015'' was in error. It has been changed to read ``7 CFR part 
3016'' in the final rule.
    Certain administrative costs associated with the first year of 
operating the FMNP were listed in Sec. 248.14(g)(1) of the interim rule 
which concerns administrative funding. These items were previously 
listed as allowable start up costs eligible for the 2 percent 
additional administrative allowance for a State's first year of 
operation. Because Pub. L. 103-448 increased the general administrative 
allowance from 15 to 17 percent and removed the 2 percent allowance for 
start up expenses, these items have been consolidated with the list of 
general allowable administrative costs found at Sec. 248.12(b)(8)-(13).

9. Matching Amount (Sec. 248.14(a)(1)(i)

    Section 204(v)(1) of the Pub. L. 103-448 amended section 17(m)(3) 
of the Act to permit the Secretary to negotiate with an Indian State 
agency a lower percentage of matching funds than the 30 percent 
requirement, but not lower than 10 percent of the total cost of the 
program, if the Indian State agency demonstrates to the Secretary 
financial hardship for the affected Indian tribe, band group, or 
council. The final rule has been amended to reflect this change in the 
Law.
    The Department has also provided for the allowance of in-kind 
contributions to be used to meet the state match requirement by 
revising Sec. 248.14(a)(1)(ii) to read: ``A State agency may count any 
form of contribution authorized by 7 CFR 3016.24 toward the State 
matching requirement, including in-kind contributions.''

10. Distribution of Funds to Previously Participating State Agencies 
(Sec. 248.14(b))

    The interim rule stated that provided sufficient FMNP funds are 
available, each State agency that participated in the FMNP in the prior 
fiscal year shall receive not less than the amount of funds the State 
agency received in the most recent year in which it received funding, 
if it otherwise complies with program requirements.
    One commenter opposed the provision stating that, because of the 
stability clause for participating States, the FMNP could be perceived 
as perpetuating inequities among States which have been participating 
in the program longer.
    This provision was derived from Section 17(m)(6)(B)(i) of the CNA 
which states that as long as the appropriation is sufficient and the 
State agency provides the required matching funds, the State agency 
shall receive not less than the amount of funds it received in the most 
recent fiscal year in which it received funds. As such, Sec. 248.14(b) 
is retained in this final rule, with minor editorial changes.

11. Ratable Reduction (Sec. 248.14(c))

    The interim rule stated that if amounts appropriated for any fiscal 
year for grants under the FMNP are not sufficient to pay to each 
previously participating State agency at the level they received in the 
most recent fiscal year, each State agency's grant shall be ratably 
reduced, except that, if sufficient funds are available, each State 
agency shall receive at least $50,000 or the amount that the State 
agency received for the prior fiscal year if that amount is less than 
$50,000.
    As one commenter emphasized, it is not the intent of the Law that 
the $50,000 minimum funding level apply to all States wishing to 
participate in the FMNP. Rather, this funding level is intended to 
serve as the minimum funding level a State agency will receive if 
ratable funding reductions are necessary due to insufficient 
appropriations.
    Pursuant to section 204(v)(4) of the Pub. L. 103-448, the 
insufficient funding reduction floor has been raised from $50,000 to 
$75,000. In addition, the analysis accompanying the bill clarifies that 
the $75,000 threshold is not meant to serve as a minimum grant level 
for first-year requests from States. Section 248.14(c) has been revised 
to reflect the new level of $75,000.

12. Expansion of Participating State Agencies (Sec. 248.14(d))

    As required by section 17(m)(6)(G) of CNA, the interim rule 
provided that 45 to 55 percent of any funds that remained after funding 
States at the level they received in the most recent fiscal year of 
operation shall be allocated to current State agencies to fund new 
participants, with the remaining 45 to 55 percent made available to 
State agencies which have not previously participated. Any funds 
recovered will be reallocated in 

[[Page 49745]]
accordance with the appropriate method determined by FCS.
    Section 204(v)(6) of Pub. L. 103-448 amended section 17(m)(6)(G) of 
the CNA to change this ratio so that funds remaining after funding 
States at the level they received in the most recent fiscal year of 
operation shall be allocated on a ratio of 75 percent for existing 
States to expand their FMNP and to 25 percent for States to start new 
programs. Section 248.14(d) of the final regulation has been modified 
to reflect this change.

13. Administrative Funding and Market Development/Technical Assistance 
(Sec. 248.14(g))

    Under the interim regulations, a State agency was limited to not 
more than 15 percent of the total FMNP funds for administration except 
that: (1) Up to an additional 2 percent of total FMNP funds could be 
used for the first year of operation to cover certain start-up costs 
and (2) after the first year of operation, with the Secretary's 
permission, up to an additional 2 percent of total FMNP funds could be 
used toward FMNP administrative expenses.
    Most of the commenters opposed the provision because of the 15 
percent limit, suggesting instead a 17 percent rate for all States. 
Section 204(v)(2) of Pub. L. 103-448 amended section 17(m)(5)(F) to 
permit FMNP State agencies to use up to 17 percent of the total amount 
of the Federal grant and the required State agency match for 
administrative expenses. The amendment eliminated the 2 percent add-ons 
for new State agencies or for existing State agencies which 
demonstrated ``financial need.'' Section 204(v)(2)(B)(ii) of Pub. L. 
103-448 also amended the CNA to now permit State agencies to use not 
more than 2 percent of total program funds for market development or 
technical assistance to farmers' markets if the Secretary determines 
that the State intends to promote the development of farmers' markets 
in socially or economically disadvantaged areas, or remote rural areas, 
where individuals eligible for participation in the program have 
limited access to locally grown fruits and vegetables. Section 
248.14(g) has been revised to reflect these changes in the 
administrative funding level and the availability of funds for market 
development or technical assistance.

14. Carry Forward/Backspend (Sec. 248.14(i))

    Section 204(v)(9) of Pub. L. 103-448 amended the CNA to eliminate 
the ability of FMNP State agencies to carry forward up to 5 percent of 
their Federal grant. The CNA continues to permit FMNP State agencies to 
``backspend'' up to 5 percent of their Federal grant. Accordingly, this 
change is reflected in Sec. 248.14(i) of this final rule.

15. Appeals Procedures for Farmers (Sec. 248.17)

    For purposes of clarification, Sec. 248.17(f) is modified by this 
final rule. The change is made to clarify that, where a State agency 
does not authorize individual farmers, it shall specify the appropriate 
appeals procedure to be used by a farmer who is denied authorization, 
disqualified or sanctioned by the farmers' market or farmers' 
association.

16. Records and Reports (Sec. 248.23)

    Under the interim rule, State agencies were required to submit to 
FCS, financial and FMNP performance data on a yearly basis as specified 
by FCS and required by section 17(m)(8) of the CNA. Program performance 
data include recipient data by category.
    One commenter opposed the provision requiring the collection of 
recipient data by category when benefits are allocated by household, 
unless additional funds are made available to enable States to develop 
and design computer systems to accurately compile and report the data.
    The Department is retaining the definition as set forth in the 
interim rule since such information collection is required by section 
17(m)(8)(A) of the CNA.

List of Subjects in 7 CFR Part 248

    Food assistance programs, Food donations, Grant programs, Social 
programs, Infants and children, Maternal and child health, Nutrition 
education, Public assistance programs, WIC, Women.

    Accordingly, the interim rule adding 7 CFR part 248 which was 
published at 59 FR 11517-11529 on March 11, 1994, is adopted as a final 
rule with the following changes.

PART 248--WIC FARMERS' MARKET NUTRITION PROGRAM (FMNP)

    1. The authority citation for part 248 continues to read as 
follows:

    Authority: 42 U.S.C. 1786.

    2. In Sec. 248.2:
    a. Definitions of ``In-kind contributions'' and ``State'' are added 
in alphabetical order.
    b. The first sentence in the definition of ``Eligible foods'' is 
revised and two new sentences are added at the end of the definition.
    c. The first sentence in the definition of ``Farmers' market'' is 
revised.
    d. The third sentence in the definition of ``Farmstand'' is 
revised.
    e. The definition of ``Matching requirement'' is revised.
    f. The definition of ``Program or FMNP'' is revised.
    g. The definition of ``Similar programs'' is revised.
    h. The definition of ``State agency'' is revised.
    The revisions and additions read as follows:


Sec. 248.2  Definitions.

* * * * *
    Eligible foods means fresh, nutritious, unprepared, locally grown 
fruits, vegetables and herbs for human consumption. * * * State 
agencies shall consider locally grown to mean produce grown only within 
State borders but may also define it to include areas in neighboring 
States adjacent to its borders. Under no circumstances can produce 
grown outside of the United States and its territories be considered 
eligible foods.
* * * * *
    Farmers' market means an association of local farmers who assemble 
at a defined location for the purpose of selling their produce directly 
to consumers. * * *
    Farmstand * * * With prior FCS approval, through the State Plan 
process, a State agency may authorize a farmstand or a nonprofit 
organization operating a farmstand to participate in the FMNP where 
necessary to ensure adequate recipient access to farmers' markets.
* * * * *
    In-kind contributions mean property or services which benefit the 
FMNP and which are contributed by non-Federal parties without charge to 
the FMNP.
* * * * *
    Matching requirement means non-Federal outlays in an amount equal 
to not less than 30 percent of the total FMNP costs for the fiscal 
year. The Secretary may negotiate with an Indian State agency a lower 
percentage of matching funds, but not lower than 10 percent of the 
total cost of the program, if the Indian State agency demonstrates to 
the Secretary financial hardship for the affected Indian tribe, band, 
group, or council. The match may be satisfied through non-Federal 
expenditures for the FMNP or for similar farmers' market programs which 
operate during the same period as the FMNP. Similar programs include 
other farmers' market programs which serve low-income women, infants 
and children (who may 

[[Page 49746]]
or may not be WIC participants or on the waiting list for WIC 
services), as well as other categories of low-income recipients, such 
as, but not limited to, low-income elderly persons.
* * * * *
    Program or FMNP * * * The Special Supplemental Nutrition Program 
for Women, Infants and Children (WIC) is authorized by section 17 of 
the Child Nutrition Act of 1966, as amended. Within section 17, section 
17(m) authorizes the FMNP.
* * * * *
    Similar programs means other farmers' market projects or programs 
which serve low-income women, infants and children, or other categories 
of recipients, such as, but not limited to, elderly persons.
    State means any of the 50 States, the District of Columbia, the 
Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, 
and the Northern Marianas Islands.
    State agency means the agriculture department, the health 
department or any other agency approved by the chief executive officer 
of the State; an Indian tribe, band or group recognized by the 
Department of the Interior; an intertribal council or group which is an 
authorized representative of Indian tribes, bands or groups recognized 
by the Department of the Interior and which has an ongoing relationship 
with such tribes, bands or groups for other purposes and has contracted 
with them to administer the Program; or the appropriate area office of 
the Indian Health Service (IHS), an agency of the Department of Health 
and Human Services.
* * * * *
    3. In Sec. 248.4:
    a. Paragraph (a)(8)(i) is revised.
    b. Paragraphs (a)(10)(ii) through (a)(10)(viii) are redesignated as 
paragraphs (a)(10)(iii) through (a)(10)(ix), respectively.
    c. A new paragraph (a)(10)(ii) is added.
    d. Paragraph (a)(15) is revised.
    e. Paragraph (a)(16) is removed.
    f. Paragraph (a)(17) is redesignated as paragraph (a)(16) and is 
revised.
    g. Paragraphs (a)(18), (a)(19), and (a)(20) are redesignated as 
paragraphs (a)(17), (a)(18), and (a)(19), respectively.
    h. A new paragraph (a)(20) is added.
    The additions and revisions read as follows:


Sec. 248.4  State Plan.

    (a) * * *
    (8) * * *
    (i) The number and addresses of participating markets, farmstands 
and area WIC clinics including a map outlining the service area and 
proximity of markets/farmstands to clinics; and
* * * * *
    (10) * * *
    (ii) For those State agencies desiring to authorize farmstands, 
justification for doing so.
* * * * *
    (15) If available, information on the change in consumption of 
fresh fruits and vegetables by recipients. This information shall be 
submitted as an addendum to the State Plan and shall be submitted at 
such a date specified by the Secretary.
    (16) If available, information on the effects of the program on 
farmers' markets. This information shall be submitted as an addendum to 
the State Plan and shall be submitted at such a date specified by the 
Secretary.
* * * * *
    (20) For those State agencies requesting the extra 2 percent 
administrative rate for market development or technical assistance to 
promote such development in disadvantaged areas or remote rural areas, 
an explanation of their justification and plans for the use of such 
funds.
* * * * *
    4. In Sec. 248.8 paragraph (a) is revised to read as follows:


Sec. 248.8  Level of benefits and eligible foods.

    (a) General. State agencies shall identify in the State Plan the 
fresh, nutritious, unprepared, locally grown fruits, vegetables and 
herbs which are eligible for purchase under the FMNP. Ineligible foods 
for the purpose of the FMNP include, but are not limited to: honey, 
maple syrup, cider, nuts and seeds, eggs, cheese, meat and seafood. 
Locally grown shall mean produce grown only within a State's borders 
but may be defined to include border areas in adjacent States. Under no 
circumstances can produce grown outside of the United States and its 
territories be considered eligible foods.
* * * * *
    5. In Sec. 248.10:
    a. The second sentence of paragraph (a) introductory text is 
revised.
    b. Paragraph (a)(4) is revised.
    c. The introductory text of paragraph (d) is revised.
    d. The first and second sentences of paragraph (e)(2) are revised.
    e. Two new sentences are added at the end of paragraph (e)(2).
    f. The last sentence of paragraph (e)(4) is revised.
    The revisions and additions read as follows:


Sec. 248.10  Coupon and market management.

    (a) General. * * * The State agency is responsible for the fiscal 
management of, and accountability for FMNP-related activities for 
farmers/farmers' markets. * * *
* * * * *
    (4) The State agency shall ensure that face-to-face training is 
conducted prior to start up of the first year of FMNP participation of 
a farmers' market and individual farmer. The face-to-face training 
shall include at a minimum those items listed in paragraph (d) of this 
section.
* * * * *
    (d) Annual training for farmers/farmers' market managers. State 
agencies shall conduct annual training for farmers/farmers' market 
managers participating in the FMNP. The State agency shall conduct a 
face-to-face training for all farmers and farmers' market managers who 
have never previously participated in the program prior to their 
commencing participation in the FMNP. After a farmer/farmers' market 
manager's first year of FMNP operation, State agencies have discretion 
in determining the method used for annual training purposes. At a 
minimum, annual training shall include instruction emphasizing:
* * * * *
    (e) Monitoring and review of farmers/farmers' markets and local 
agencies. * * *
    (2) Each State agency shall rank participating farmers and farmers' 
markets by risk factors, and shall conduct annual, on-site monitoring 
of at least 10 percent of farmers and 10 percent of farmers' markets 
which shall include those farmers and markets identified as being the 
highest-risk. Mandatory high-risk indicators are a proportionately high 
volume of FMNP coupons redeemed by a farmer as compared to other 
farmers within the farmers' market and within the State, recipient 
complaints, and farmers and farmers' markets in their first year of 
FMNP operation. * * * If application of the high-risk indicators 
results in fewer than 10 percent of farmers and farmers' markets as 
high-risk, the State agency shall randomly select additional farmers 
and farmers' markets to be monitored in order to meet the 10 percent 
minimum. The high-risk indicators listed above generally apply to a 
State agency already participating in the FMNP. A State agency 
participating in the FMNP for the first time shall, in lieu of applying 
the high-risk indicators, randomly select 10 percent of its 
participating farmers and 10 percent of 

[[Page 49747]]
its participating farmers' markets for monitoring visits.
* * * * *
    (4) * * * WIC State agency reviews of WIC local agencies, which 
include reviews of FMNP practices, may contribute to meeting the 
requirement that all local agencies be reviewed once every 2 years.
* * * * *


Sec. 248.11  [Amended]

    6. In Sec. 248.11, paragraph (g) is amended by removing the 
reference to ``Sec. 248.10(f)'' and adding, in its place, a reference 
to ``Sec. 248.10(h)''.
    7. In Sec. 248.12:
    a. The fourth sentence of paragraph (a)(1)(i) is revised.
    b. Paragraph (a)(1)(ii) is redesignated as paragraph (a)(1)(iii) 
and the third sentence is amended by removing the reference to ``7 CFR 
part 3015'' and adding in its place, a reference to ``7 CFR part 
3016''.
    c. A new paragraph (a)(1)(ii) is added.
    d. New paragraphs (b)(8), (b)(9), (b)(10), (b)(11), (b)(12), 
(b)(13) and (b)(14) are added.
    The additions and revisions read as follows:


Sec. 248.12  FMNP costs.

    (a) General.--(1) Composition of allowable costs.* * *
    (i) Food Costs and administrative costs. * * * Except as provided 
in Sec. 248.14(g) of this part, a State agency's administrative costs 
under the FMNP may not exceed 17 percent of its total FMNP costs.* * *
    (ii) Market development or technical assistance costs. Market 
development or technical assistance costs are those costs under 
Sec. 248.14(h) incurred to promote the development of farmers' markets 
in socially or economically disadvantaged areas, or remote rural areas, 
where individuals eligible for participation in the program have 
limited access to locally grown fruits and vegetables. Subject to a 
determination by the Secretary under Sec. 248.14(h), a State agency 
may, during any fiscal year, use not more than 2 percent of total 
program funds for such market development or technical assistance.
* * * * *
    (b) Specified allowable administrative costs.* * *
    (8) The cost of determining which local WIC sites will be utilized.
    (9) The cost of recruiting and authorizing farmers/farmers' markets 
to participate in the FMNP.
    (10) The cost of preparing contracts for farmers/farmers' markets 
and local WIC providers.
    (11) The cost of developing a data processing system for redemption 
and reconciliation of FMNP coupons.
    (12) The cost of designing program training and informational 
materials.
    (13) The cost of coordinating FMNP implementation responsibilities 
between designated administering agencies.
    8. In Sec. 248.14:
    a. A new sentence is added before the second sentence of paragraph 
(a)(1)(i).
    b. Paragraph (a)(1)(ii) is revised.
    c. A new sentence is added at the end of paragraph (a)(1)(iii).
    d. Paragraph (b) is revised.
    e. Paragraph (c) is revised.
    f. The first sentence of paragraphs (d)(1) and (d)(2) are revised 
and paragraph (d)(3) is revised.
    g. Paragraph (e)(1) is amended by removing the words ``(exclusive 
of the 5 percent carry forward)'' from the first and second sentences 
of that paragraph.
    h. Paragraph (g) is revised.
    i. Paragraphs (h), (i) and (j) are redesignated as paragraphs (i), 
(j) and (k) respectively.
    j. A new paragraph (h) is added.
    k. Newly redesignated paragraph (i) is revised.
    l. Newly redesignated paragraph (j) is revised.
    m. Newly redesignated paragraph (k) is revised.
    The revisions and additions are as follows:


Sec. 248.14  Distribution of funds.

    (a) Conditions for receipt of Federal funds.--(1) Matching of 
funds.
    (i) Match amount. * * * The Secretary may negotiate a lower 
percentage of matching funds, but not lower than 10 percent of the 
total cost of the program, in the case of an Indian State agency that 
demonstrates to the Secretary financial hardship for the affected 
Indian tribe, band, group, or council.* * *
    (ii) Sources of matching contributions. A State agency may count 
any form of contribution authorized by 7 CFR 3016.24 toward the State 
matching requirement including in-kind contributions.
    (iii) Failure to match. * * * This match amount may be lower for 
those Indian State agencies that have demonstrated to the Secretary 
financial hardship as set forth in paragraph (a)(1)(i) of this section.
* * * * *
    (b) Distribution of FMNP funds to previously participating State 
agencies. Provided that sufficient FMNP funds are available, each State 
agency that participated in the FMNP in any prior fiscal year, shall 
receive not less than the amount of funds the State agency received in 
the most recent fiscal year in which it received funding, if it 
otherwise complies with the requirements established in this part.
    (c) Ratable reduction. If amounts appropriated for any fiscal year 
for grants under the FMNP are not sufficient to pay to each previously 
participating State agency at least an amount as identified in 
paragraph (b) of this section, each State agency's grant shall be 
ratably reduced, except that, to the extent permitted by available 
funds, each State agency shall receive at least $75,000 or the amount 
that the State agency received for the most recent prior fiscal year in 
which the State participated, if that amount is less than $75,000.
    (d) Expansion of participating State agencies and establishment of 
new State agencies.* * *
    (1) Of the remaining funds, 75 percent shall be made available to 
State agencies already participating in the FMNP that wish to serve 
additional recipients.* * *
    (2) Of the remaining funds, 25 percent shall be made available to 
State agencies that have not participated in the FMNP in any prior 
fiscal year. * * *
    (3) In any fiscal year, any FMNP funds that remain unallocated 
after satisfying the requirements of paragraphs (d)(1) and (d)(2) of 
this section, shall be reallocated in accordance with paragraph (k) of 
this section.
* * * * *
    (g) Administrative funding. A State agency shall have available for 
administrative costs an amount not greater than 17 percent of total 
FMNP funds. The 17 percent administrative cost limitation shall not 
apply to any funds that a State agency may contribute in excess of its 
minimum matching requirement. A State agency may use any non-Federal 
contributions in excess of the 30 percent (or the negotiated percentage 
for those Indian State agencies that received a lower amount) matching 
requirement for food and/or administrative costs.
    (h) Market development. A State agency shall be permitted to use 
not more than 2 percent of total program funds for market development 
or technical assistance to farmers' markets if the Secretary determines 
that the State intends to promote the development of farmers' markets 
in socially or economically disadvantaged areas, or remote rural areas, 
where individuals eligible for participation in the program have 
limited access to locally grown fruits and vegetables.
    (i) Transfer of funds. A State agency may use not more than 5 
percent of the 

[[Page 49748]]
Federal FMNP funds made available for the fiscal year to reimburse 
expenses incurred by the FMNP during a preceding fiscal year. The State 
agency shall provide such justification for its request to spend back 
funds under this paragraph as FNS may require.
    (j) Recovery of unused funds. State agencies shall return to FCS 
any unexpended funds made available for a fiscal year by February 1 of 
the following fiscal year.
    (k) Reallocation of funds. Any funds recovered under paragraphs 
(d)(3) and (j) of this section will be reallocated in accordance with 
the appropriate method determined by FCS.
    9. In Sec. 248.16 the second sentence in paragraph (f) is revised 
to read as follows:


Sec. 248.16  Administrative appeal of State agency decisions.

* * * * *
    (f) Additional appeals procedures for State agencies which 
authorize farmers' markets and not individual farmers. * * * A State 
agency which authorizes farmers' markets and not individual farmers 
shall ensure that procedures are in place to be used when a farmer 
seeks to appeal an action of a farmers' market or association denying 
the farmer's application to participate, or sanctioning or 
disqualifying the farmer.
    10. In Sec. 248.17:
    a. The third sentence of the introductory text of paragraph (b) is 
revised.
    b. The first sentence of paragraph (c)(1)(i) is revised.
    c. Two new sentences are added at the end of paragraph (c)(1)(ii).
    The revisions and additions read as follows:


Sec. 248.17  Management evaluations and reviews.

* * * * *
    (b) Responsibilities of FCS. * * * These evaluations shall also 
include reviews of selected local agencies, and on-site reviews of 
selected farmers/farmers' markets. * * *
* * * * *
    (c) Responsibilities of State agencies. * * *
    (1) * * *
    (i) Annual monitoring reviews of participating farmers/farmers' 
markets, including on-site reviews of a minimum of 10 percent of 
farmers and 10 percent of farmers' markets, which includes those 
farmers and markets identified as being the highest risk. First year of 
operation in the FMNP shall be considered a high-risk indicator. * * *
    (ii) * * * WIC State agency reviews of local agencies conducted for 
the WIC Program may contribute to meeting the FMNP requirement that all 
local agencies be reviewed once every two years if the reviews include 
reviews of FMNP practices. When the WIC State agency conducts a review 
of the local agency outside of the FMNP season, a review of documents 
and procedural plans of the FMNP, rather than actual FMNP activities, 
is acceptable.
* * * * *
    11. In Sec. 248.25, paragraph (a) is revised to read as follows:


Sec. 248.25  FMNP information.

* * * * *
    (a) Connecticut, Maine, Massachusetts, New Hampshire, New York, 
Rhode Island, Vermont: U.S. Department of Agriculture, FNS, Northeast 
Region, 10 Causeway Street, Room 501, Boston, Massachusetts 02222-1066.
* * * * *
    12. Section 248.26 is revised to read as follows:


Sec. 248.26  OMB control number.

    The collecting of information requirements for Part 248 have been 
approved by the Office of Management and Budget and assigned OMB 
control number 0584-0477.

    Dated: September 20, 1995.
William E. Ludwig,
Administrator, Food and Consumer Service.
[FR Doc. 95-23950 Filed 9-26-95; 8:45 am]
BILLING CODE 3410-34-U